Practical Completion and reference dates under s 9 of the SOP Act – Practical guidance from the Supreme Court of Victoria in J Hutchinson Pty Ltd v Transcend Plumbing and Gasfitting Pty Ltd  VSC 39
The existence of a reference date under the contract is a statutory precondition to the making of a valid payment claim, which is in turn a precondition to the jurisdiction of an adjudicator. Pursuant to s 9(2)(a)(i) of theBuilding and Construction Industry Security of Payment Act 2002(Vic) (SOP Act) a reference date in relation to a construction contract means, amongst other things, a date determined by or in accordance with the terms of the contract as a date on which a claim for a progress payment may be made.
InTranscend Plumbing, Hutchinson was the head contractor engaged to construct a number of new schools in Victoria and Transcend was the subcontractor engaged to perform civil, stormwater, sewer, water and fire services works for two secondary schools. Transcend submitted payment claims in April 2022 of some $1.4m but Hutchinson said the payment claims were not supported by valid reference dates under the Subcontract. An adjudicator determined that Transcend was entitled to payment.
Clause 37(a)(a) of the Subcontract provided for reference dates “prior to practical completion” or “at practical completion”. Hutchinson challenged the determination arguing that Transcend had not submitted payment claims by the reference dates. Hutchinson contended that those dates were to be determined on the meaning to be given to the phrase “prior to practical completion” in cl 37(a)(a) of the Subcontract, which in turn required determination of the meaning of “practical completion” and whether that phrase meant:
- when the works have, as a matter of fact, reached the stage of “practical completion” such that the Subcontractor’s entitlement to make monthly progress claims ceased once that stage has been reached regardless of whether or not a certificate of practical completion had been issued; or
- alternatively, the “date of practical completion” as evidenced in a certificate of practical completion or as determined in any expert determination or litigation, such that the Subcontractor’s entitlement to make monthly progress claims continued to accrue until that specified date.
Examining the text and purpose of the Subcontract, the Court (Stynes J) held that:
- the date of “practical completion” was that evidenced in a certificate of practical completion and not the underlying fact of practical completion;
- having regard to the text of the Subcontract, the phrase “prior to practical completion” in cl 37(a)(a) meant prior to the date on which practical completion was reached, that is, prior to the “date of practical completion”; and
- the phrase “at practical completion” linked the issuance of the certificate of practical completion to the date “prior to practical completion”, thereby marking the period and transition between those dates.
The Court’s decision provides welcome guidance on the importance of a certificate of practical completion to determination of the date of practical completion, rather than determining that date by reference to when, in point of fact, the works reached a state of practical completion. The decision also provides guidance on how practitioners can navigate the relationship between the identification of reference dates under s 9 of the SOP Act with the dates stipulated in the construction contract on progress payments based on particular milestone events.
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